Category - Transportation facility provided to the students

[Kewal Trehan]

An educational institution (Society) running a network of schools is plying buses for transportation of school students only and charges transportation fee from the students. The Society is an educational institution notified u/s 10(23C)vi of the Income Tax Act, 1961. The society exists for the purpose of education and not for earning commercial profits. The Service tax Dept. on the plea that as the society is charging transportation fee from the students, it is thus covered under the category ' tour operators' and therefore exigible to service tax liability. Kindly advise whether the approach of the Dept. is legaly tenable or not. Please support your advise with relevant provision/notification/circular/ case laws.

[Surender Gupta]

1. This plea is not acceptable that the school, being a charitable socieity, would remain exempt from service tax. 2. Though there is no enough data is available on record concerning this issue, apparently it seems that the school may not be liable to service tax under this category. However, if it is running buses under contract carriage permit, the position may differ. Full facts are required.

AI Summary

Taxability of student transportation: classification as tour operator may be improper, but contract carriage use could alter liability. Whether transportation services provided by a charitable educational society to its students attract service tax as a tour operator service depends on the characterisation of the activity; on the available facts the reviewer finds the department's classification as a tour operator not clearly supportable, though liability could arise if the buses operate under a contract carriage permit, and further factual material is required to decide applicability.